A California family that just did an FHA Streamline Refinance

FHA Streamline Refinance

Key Topics In This Article: Definition | Benefits | Requirements | Pros Vs. Cons | Rates

The FHA Streamline Refinance program offers the ability to obtain a lower mortgage rate in a minimal amount of time. Below, I’ll define what an FHA Streamline Refinance is, the benefits, requirements, pros and cons, and interest rates associated with the program.

If you’re a California homeowner who has an FHA loan, you should consider the FHA Streamline Refinance program when you apply for your next refinance.

What is an FHA Streamline Refinance?

An FHA Streamline Refinance is when a homeowner who has a current FHA loan refinances into a new special designation FHA loan with minimal documentation, no appraisal, and in a short time frame.

Simply put, it’s one of the easiest and most efficient ways to refinance a mortgage, and it’s only available to those with an FHA home loan.

Mortgage experts agree that the FHA Streamline Refinance is one of the best refinance programs in the mortgage industry and is similar to the VA Streamline Streamline Refinance program. This rapid refinance program has numerous benefits and specific requirements that loan applicants must meet before an underwriter will approve the loan.

FHA Streamline Refinance Benefits

The benefits of doing a FHA Streamline Refinance are simple: a lower interest rate, a lower monthly mortgage payment, and a simplified process.

Every loan program has its own unique list of benefits. Here are the benefits associated with the FHA Streamline Refinance program for California homeowners.

  • No income documentation is needed
  • Close your loan in as little as two weeks
  • No appraisal is needed, which saves you hundreds of dollars
  • Less than perfect credit – usually not a problem even if you have collections and charge-offs
  • Next to no refinance documentation needed – All you need is your current mortgage statement and homeowners insurance

The benefits of an FHA Streamline Refinance are clear. Not having to do an appraisal, having no income documentation, and accepting less-than-perfect credit make it one of the best refinance programs in California.

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California FHA Streamline Refinance requirements

When a loan officer submits your loan application to underwriting, you have to be prepared to meet certain requirements before they will approve your request. Here are the basic California FHA Streamline Refinance requirements every loan applicant should know.

Your Current Mortgage Must Be An FHA Loan

Conforming and jumbo home loan homeowners are not eligible for the FHA Streamline refinance program. This is not a lender rule but a rule set by FHA. The reason for this rule is that FHA already guarantees the original loan, so this program allows them to help their current customers.

Conforming and jumbo home loans do not have a corresponding streamline refinance product.

There Are LTV Requirements To Meet

Typically, with an FHA loan, your Loan-To-Value ratio must be at or below 96.5%.1 However, with the FHA Streamline Refinance, you can owe more than the house is worth and still and still complete the program.2

Before completing a loan application, check with your loan officer about the current maximum LTV ratio for the FHA Streamline Refinance program in California.

FHA Streamline Refinance DTI limitations

Your maximum Debt-To-Income ratio is 43%; however, in some cases, you can go higher. If your DTI is higher than 43%, you’ll want to consider what compensating factors the underwriter should know. For example, do you have a high credit score? Do you have liquid assets?

Your FHA Home Loan Must Be Current

If you are behind with your mortgage payments, you’ll have to wait until you are caught up before accessing the program. If you’ve missed one payment in the last 12 months, you’re fine; however, a few lenders require no missed mortgage payments in the previous 12 months to be eligible for an FHA Streamlined refinance.

Tell your loan officer upfront before moving forward with an application if you have a late payment.

There’s A Waiting Period

You must be 210 days from your last FHA mortgage transaction before closing your streamlined refinance (and six payments must have been posted before the loan application is completed).3 This is to prevent mortgage companies from trying to refinance their clients too soon.

There Must Be A “Net Tangible Benefit”

To be able to access the program, you have to have a “net tangible benefit.”4

What is a net tangible benefit? That means the underwriter for your loan must confirm that you are receiving a clear benefit with the new loan. That means at least a 0.50% or more reduction in your interest rate.

This requirement protects the homeowner from unscrupulous mortgage companies.

The Original Borrower Must Be On The New Loan

If you are doing an FHA Streamline Refinance, then the original borrower from the current mortgage must also be on the new refinanced mortgage. If you need to add a borrower with a vested interest in the property, you can do so per HUD guidelines.5

What Does Vested Interest Mean?

According to Merriam-Webster, vested interest means the following;

An interest (such as a ttitle to an estate) carrying a legal right of present or future enjoyment.


So, when it comes to the mortgage industry, someone with a “vested interest” is someone who has a legal right to the property. You can show vested interest by making mortgage, property tax, and/or property insurance payments.

If you want to add someone to your loan, talk with your loan officer to learn about your current options under the FHA Streamline Refinance program.

Minimum Credit Score Required

FHA does not have a minimum credit score; however, some lenders require homeowners to have a 580 or higher credit score while others will go below a 580 credit score.

Most lenders in California will require a 600 or 620 credit score.

Pros Vs. Cons

Here are some important pros vs cons of doing an FHA Streamline Refinance that every California homeowner should consider before completing a loan application.


  • Low rates
  • No appraisal
  • Minimal documentation
  • Fast closing (usually two-three weeks)


  • No cash-out
  • Home renovations are not allowed
  • FHA upfront mortgage insurance
  • Only available to some homeowners

No Cash-Out

While the regular FHA refinance program allows for cash-out (you can borrow up to 80% of the home’s value when taking cash-out6), the FHA Streamline Refinance program does not have the option to pull cash-out to pay off debt. Per FHA rules set by Housing and Urban Development, the maximum cash-out on an FHA Streamlined Refinance is limited to $500.7

Home Renovations Are Not Allowed

If you want to repair or renovate your home, the FHA Streamline Refinance program is not for you (FHA has another program dedicated to that). This rapid refinance program is strictly designed to be quick and focused on lowering your interest rate and monthly payment.

FHA Streamline Refinance Has Mortgage Insurance

Yes, an FHA Streamline Refinance comes with Mortgage Insurance.

FHA Mortgage Insurance (MI) is an insurance policy in case the homeowner defaults on the loan. The Federal Housing Administration covers the costs of the default by reimbursing the mortgage company for the losses associated with the default.

The only way to remove the MI is to either sell the home or refinance the mortgage into a conventional home loan that does not have Private Mortgage Insurance (PMI).

Only Available To Some Homeowners

Not everyone is eligible to refinance under the FHA Streamline Refinance for California homeowners program, and that’s a big downside to what’s being offered. The big question is why, and I think I know the answer.

If FHA already guarantees your mortgage, then they have a big incentive to put you on a better loan with a lower rate and, more importantly, a lower mortgage payment. If you have a lower mortgage payment, you are less likely to default on your loan.

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FHA Streamline mortgage rates

Staying on top of current FHA Streamline mortgage rates is a big part of doing an FHA Streamline Refinance. Remember that FHA 30-year fixed mortgage rates are typically lower than 30-year fixed conforming mortgage rates.

They are usually (not always) about .125% – .25% lower than conforming home loan rates and can change daily. The great thing about FHA Streamline mortgage rates is that a person with a low credit score can usually get the same rate (or very similar) as someone with a high credit score.

FHA Streamline Refinance Bottom line

Mortgage industry experts know that the FHA Streamline Refinance program is one of the more popular refinance programs. It’s quick and easy, and you always get a better interest rate. However, you do have to have a current FHA loan, and there is a waiting period before you can apply for the program. This is why you want to work with an expert to ensure you don’t waste your time.

If you currently have an FHA home loan, consider the rapid refinance program FHA offers. An FHA Streamline Refinance might not be for everyone; however, for many homeowners, it’s an excellent opportunity to lower their interest rate. The limited documentation, no appraisal, quick closing, and lower rates make it ideal for the right homeowner.

Citation Sources:

  1. The FHA Refinance Loan Maximum Mortgage Calculation – FHA.com
  2. FHA Streamline Refinance – The Mortgage Reports
  3. FHA Streamline Loans Require Seasoning – National Association of Mortgage Underwriters
  4. Streamline Your FHA Mortgage – U.S. Department of Housing and Urban Development
  5. Handbook 4000-1 – U.S. Department of Housing and Urban Development
  6. FHA Cash-Out Refinance: What It is, How It Works – Investopedia.com
  7. Section C Streamline Refinance – US Department of Housing and Uban Development
Loan Officer Kevin O'Connor

About The Author

Loan Officer Kevin O'Connor has over 17 years of experience as a Mortgage Loan Originator and is a trusted resource for mortgage education and information. He's the content creator of K.O. Home Loan Solutions and is licensed by the state of California and the Nationwide Mortgage Licensing System. He has a top rating with the Better Business Bureau, Google, Yelp, and Zillow. You can contact him at 1-800-550-5538. CA DRE #01499872 / NMLS #247447